How To Get Started With Single Family Rental Investing – Winston Rowe And Associates
Thinking of getting started with single family rental real estate investing? Here's some tips to get started.
If you're looking to add SFR investments to your portfolio, here's a look at some tips for getting started.
Assess Your Finances
First, you'll need to know where you stand financially. Do you qualify for a decent loan? How much of a down payment could you make? It's also important to know your credit score. When it comes to securing a loan with a low interest rate, a good credit score (generally, above 740), and the ability to make a large down payment will help.
Create A Plan
You'll also want to take the time to establish your long-term investment goals, and create a plan for investing. If you've already decided on SFRs, make sure you outline your criteria — that is, what type of returns are you looking to generate (12%? 15%?). Then, resolve to invest only in property that meets your criteria. Keep in mind that an inexpensive property doesn't automatically indicate a good deal.
You don't have to rush out and purchase 20 properties in two years. Many real estate investors start out much smaller. Some investors even start out with a duplex or house with a basement apartment, living in one unit while renting out the other.
Find the Right Property
Next, it's time to find your first investment property. Keep in mind that when investing in real estate, you aren't limited to your own backyard. In fact, looking outside your own local area means that you'll be able to take advantage of potentially better housing and rental markets, allowing you to find an investment that fits your criteria.
You'll want to secure financing early on. Getting pre-approved can help you move quickly when a deal arises.
For investment property, the loan terms are a lot more stringent. Generally, you'll need a much as 20% or even 25% for a down payment. The bank will also typically require a breakdown of your assets and annual income, so you'll want to compile this information in a spreadsheet. They'll also want to see your debt-to-income ratio, and ensure that it's no more than 40-50%. Keep in mind, too, that if you're buying an inexpensive investment property as a fixer-upper, most banks will want to see a cash buyer.
Create A Plan for Management
Before you dive in, you'll also want to consider whether you're fully prepared to be a landlord. I know firsthand that overseeing rentals is a lot of work, and you'll want to make sure you're ready for all of the responsibilities that it entails. A knowledge of landlord-tenant law, including fair screening policies, is vital. Also, key is ensuring that you're protected with a rental agreement from the start.
Assemble Your Team
Once you have decided when and where you want to invest, it is important to start networking and building a team. Having a good support network allows you to sidestep many common issues that befall first-time and even experienced landlords, and can make a world of difference when it comes to embarking on a successful investment career.
In addition to a property manager, you'll also want to consider enlisting the help of local investor-friendly real estate agents as well as an attorney for drafting up rental agreements and policies. You'll also want to consult with a CPA to see how owning rental property will impact you from a tax perspective.
Published by Winston Rowe and Associates, they can be contacted at https://www.winstonrowe.com